Revenue allocation, federalism and state of the nation

The issue of revenue allocation has remained a contentious and very volatile subject in Nigeria generating very strong reactions from each side of the divide anytime it is up for debate. Central to the issue is the whole question of over concentration of enormous financial resources at the federal government at the expense of other federating units.

The current revenue formula in use is tilted in favour of the federal government, which takes a whopping 52.68 per cent of allocation from the Federation Account. The 36 states have a combined share of 26.72 per cent, while the 774 local government areas in the country take 20.6 per cent. Oil-producing states share 13 per cent in accordance with the principle of derivation.

However, of late, there have been clamours for a review of the status quo by cutting the federal government’s lion share to make more funds available to states and local governments. State governors, through the Governors’ Forum, have led the clamour, claiming that development in their domain was being stifled due to inadequate funds. The financial realities in the states and local governments at present had made the need to review the formula very urgent. Without mincing word, the present revenue formula is not realistic.

In fairness to all the states in the country, with, perhaps, few exceptions, most of them are making efforts, despite their limited resources to deliver the dividends of democracy to their respective states. In Lagos, for instance, the state government has continued its relentless pursuit of ambitious projects such as the redevelopment of the Lagos-Badagry expressway into a 10- lane road incorporating light -rail and BRT lanes, the expansion of the Ketu-Ikorodu road, the construction of more inner roads across the state, the Eko Atlantic City project, Independent Power Projects, construction of 16 Mother and Child Centres for easy medical access, environmental regeneration in addition to 1,960 other massive infrastructural renewal projects scattered across the state. This is, indeed, why allusion is currently being made to the evolvement of a new Lagos in many circles. But, in view of the reality of limited capacity to fund capital projects, most of the states in the federation have had to opt for the option of either borrowing from banks or raising bond from the capital market to finance capital projects. This is because the money they receive monthly from Abuja is barely enough to settle the salaries of workers as well as other overhead costs.

Sadly, however, while most of the states are doing all they could to improve the standard of living of their people, same cannot really be said of the federal government which ironically corners the bulk of the country’s resources. This, of course, is not peculiar to the present administration of President Goodluck Jonathan. Succeeding federal administrations in the country have always left the country worse than they met it. From the ill- fated Shehu Shagari administration till date, the country has been wobbling and fumbling with no clear -cut sense of direction. Most federal roads are still bad, as they have always been; power remains evasive; major industries are folding up at an alarming rate; federal universities have become sorry sights while federal hospitals are not even good enough for senior government officials who would rather embark on medical tourism abroad at a great cost to the country. The rate at which federal infrastructure across the country rot away leaves much to be desired.

The question then is: what does the federal government do with the huge state resources at its disposal via the favourable revenue allocation it gets from the system? If the federal government gets so much and yet is doing so little, where then is the justification for the current lopsidedness in the revenue allocation system ?After all, to whom much is given, it is said that much is expected but in the case of the federal government, the reverse is the case.

Isn’t it time then for an urgent need to review the current revenue sharing formula in consonance with the needs of the other federating units? It is quite clear that of all the three federating structures making up the federation, it is the states and local governments that are really touching the lives of the people as they are the closest to them. The National Assembly needs to really emphasise fiscal federalism when it comes to the issue of constitutional amendment. The federal government should devolve more powers to the states or regions that make up the federation. Equally, some of the items on the exclusive legislative list of the current constitution such as customs, ports, police etc should go to the residual legislative list. For instance, the current trend of insecurity in the country requires state police that would normally be in a better position to curb crime using the community policing model. How can the governor of a state be held liable for the insecurity being experienced in his domain when the commissioner of police only reports to the Inspector General of Police and not the state governor?

The federal government makes enormous financial gains from the Tin Can Island and Apapa Ports in Lagos and Calabar respectively from import and export duties but this is not supposed to be the case since these revenues should normally accrue to the Lagos and Cross River states’ governments who should in turn pay taxes of 20% of the revenues to the federal government. The collection of revenue by the Nigerian customs at these ports negates the principles of true federalism because these coastal states own these port resources and thus should not be deprived of the benefits accruing from its exploitation.

True federalism implies a compromise between the extreme concentration of power (the current case in Nigeria) and a loose confederation of independent states, for governing people usually in a large expanse of territory. For instance, if we get rail into the Concurrent List and ensure the amendment of the Railway Act, it will not only be for the benefit of all the states and regions, but the country as a whole. In the same spirit of true federalism, it is also important to decentralize the control of power. Undoubtedly, without energy, every effort at development, including the drive will be hampered.

In the spirit of justice and fairness, we need to reverse the status quo where the federal government holds as much power and influence as it currently does over the revenue sharing formula as well as other critical sectors in the country because it has little to show for it. We need to revert to the practice of true federalism in its true sense as it is being done in other advanced democracies of the world. Indeed, for us to reduce the pressure and tension associated with governance at the centre, this is the time to tilt towards the evolvement of a weak centre with stronger federating units. This is a main feature of a true federation.

The solution to the myriad of problems currently confronting the country is to address the distorted federalism that the country currently runs. For us to move forward as a nation, grow economically, experience peace and attract the necessary foreign and local investments that would ensure real development, the restructuring of the polity to reflect true federalism is non-negotiable. The earlier we put an end to the current brand of federalism which the Deputy Senate President, Ike Ekweremadu, recently termed ‘feeding bottle federalism, the better for the whole country. The arrangement is grossly un-progressive and misleading. It should be discontinued.

• Ibirogba is Honourable Commissioner for Information and Strategy, Lagos State